Job Creation:Art or Science?

June 6, 2013 43rd Annual Alabama County

Government Institute PresentationAuburn, Alabama

Alabama Department of Commerce

Created: 1969 Secretary of Commerce: Greg Canfield

Employees: 32

Mission: “To coordinate economic development resources leading to quality job creation throughout

Alabama.”

Organizational Components: Business Recruitment

AIDTInternational Trade

Small Business AdvocacyFilm Office

Budget Source: General Fund

The Alabama Department of Commerce

Drive Economic Development in the State of Alabama

Alabama Department of Commerce’sGoal

Fundamentals of Economic Development

Economic Development is …

1. The increase in the standard of living of the state’s population;

2. It’s scope includes the process and policies by which the state improves the economic, political, and social well-being of its people;

3. Or, another definition is………. JOBS!

State Economic Activity

What are some factors within economies that might influence the economic development process?

Political Factors

Technological Factors

Economic Factors

SocialFactors

PEST Analysis

• Public Policy• International Conflicts• Monetary Crisis• Natural Disasters• International Trade• Consumer Confidence• Others…

Influencing Factors

Fundamentals of Economic Development

“Uncertainty is the enemy of capital investment.”*

*Area Development, “Uncertainty: The New Normal for Site Selection and Facility Investment”, Mark Sweeney, January 2012

Fundamentals of Economic Development

““…ready communities with reduced risk profiles will win the day.”*

*Area Development, “Uncertainty: The New Normal for Site Selection and Facility Investment”, Mark Sweeney, January 2012

Areas of Economic Development

– Industrial Recruitment

– Business Retention– Commercial / Retail– Tourism– Film– Government– Others

What is our concept of competition, and……

Why Select the USA?World’s Largest EconomyCompetitive Business and Investment

ClimateCommanding Consumer MarketVast Internal markets = Economies of

ScaleCenter of Research and InnovationWorld’s Top UniversitiesThe Global Leader in Information

TechnologyProtector of Intellectual PropertyHighly Educated and Productive

Workforce

Source: Published on SelectUSA (http://selectusa.commerce.gov)

Business Advantages• Team Alabama• Workforce Availability and Training• Right-To-Work State• Competitive Taxes and Incentives• Readily Available Products-Buildings and

Sites• Heart of the Southeastern Transportation

Network• One-Stop Shop for Environmental Permitting• Proven Record of Investment and Trade

Successes

A Decade of Alabama’s Announced

Job Creation

Source: EDPA

Job Creation Categories• Expansion

–Direct–Consolidation–Re-Start–Joint Venture–Co-Location–Business Arrangement

• New–Domestic–International–Start-Up

What are the top site selection factors, as cited by corporations?

1. Highway Accessibility 2. Labor Costs

2T. Availability of Skilled Labor 4. Corporate Tax Rate 5. Occupancy or Construction Costs

5T. State and Local Incentives 7. Energy Availability and Costs 8. Tax Exemptions 9. Proximity to Major Markets10. Low Union Profile

Corporate Survey Site Selection Factors

Source: Area Development magazine, 26th Annual Corporate Survey, published Winter 2012.

1. Low Crime Rate2. Healthcare Facilities2T. Housing Availability4. Housing Costs5. Ratings of Public Schools 6. Colleges and Universities in

Area7. Climate8. Recreational Opportunities9. Cultural Opportunities

Corporate Survey Quality of Life Factors

Gulf Shores, Alabama

Source: Area Development magazine, 26th Annual Corporate Survey, published Winter 2012.

Competitive Site Selection

Screening Process

Site Decision

Candidate Locations

Define Search Region Center-of-Market Analysis

Cost Modeling / Incentives

Regional ScreeningProject CriteriaRFP & Proposal Screening

Risk Analysis

Site Visits / Comparative Assessment

Source: McCallum Sweeney Consulting, Courtesy of Ms. Jeanette Goldsmith

Job Creation Due Diligence Examples

• EMSI Workforce Analysis• Tax Incentive Analysis• Revenue Evaluation (Local & State)• Benefit/Cost Analysis• AIDT (Training) Valuation• Transportation/Logistics Sensitivity Analysis• Incentive Evaluation/Net Present Values• Cost Modeling• Risk Mitigation• Others

Typically, what are Alabama’s economic development incentives?

IncentivesTaxes

- Sales and Use Tax Abatements- Property Tax Abatements and Exemptions- Income Tax Credits and Deductions- Inventory Tax Exemption- Enterprise Zone Credit/Exemption- Full Employment Act of 2011

Training- Alabama Industrial Development Training- ADECA Workforce Development Division- Alabama Technology Network (ATN)

IncentivesInfrastructure

- Industrial Access Road & Bridge- Economic Development Grant- Community Development Block Grant- USDA Rural Development- Appalachian Regional Commission- Economic Development Administration

Environmental Permitting- One Stop Environmental Permitting

IncentivesFinancing

- AlabamaSAVES- CAPCO

- Alabama NMTC - ED Revolving Loan Programs- TVA Economic Development Loan Fund- Community Development Block Float Loan Program- Industrial Revenue Bonds (IRBs)- USDA Rural Development

What is the view from Site Selection Consultants?

Relative Importance of Incentives to Clients when making Location Decisions:

1. Have always been of great importance 40%2. Are more important now than in the past 45%3. Are less important now than in the past 15%

Source: Consultants Site Guide, Area Development magazine, Winter 2012, www.consultantssiteguide.com.

Which Types of Incentives do Clients Consider Most Important when Deciding on a Location?

1. Tax incentives 42%2. Cash grants 33%3. Other financial incentives 21%4. Working training incentives 9%5. Other incentives 23%

Which Factors have you Evaluated in Recent Location or Expansion Projects that you Discovered to be Most Deficient?

1. Labor Availability 26%2. Incentive closing funds 40%3. Advanced ICT service 2%4. Pre-qualified sites 32%5. Other 10%

Source: Consultants Site Guide, Area Development magazine, Winter 2012, www.consultantssiteguide.com.

How are site locations determined, and……..

……..what is your probability?

What are the properties we can promote in Alabama?

1. 511 Existing Buildings*2. 479 Industrial Sites/Property*3. 39 Favored Geographic

Areas**4. 28 Approved Enterprise

Zones***5. 28 Speculative Buildings*6. 40 AdvantageSite

Designations*

* Source: Economic Development Partnership of Alabama, April 18, 2013** Source: Alabama Department of Revenue *** Source: Alabama Department of Economic & Community Affairs

ID Site1 Jackson County Industrial Park2 MG Industrial Park3 Rogersville Business Park4 South Dallas Godwin Site5 Airport Industrial Park Site6 Florence-Lauderdale IP Site 7 Coop Dist of Winston County8 Jefferson Metropolitan Park MC9 NE Opelika Ind. Park Site

10 Yancey Parker IP Phase II11 Conners Island Business Park12 Interstate Business Park13 Fayette Industrial Park #214 Troy Industrial Park South15 Shoals Research Airpark Site16 Jasper Industrial Park17 Chambers Co IP South Site18 Monroeville IP East Site19 Jefferson Metropolitan Park LS20 Virginia Station Phase 1

ID Site21 Auburn Technology Park West22 Interstate Industrial Park23 Tallassee Corporate Park24 Hamilton I-22 Industrial Park 25 Guin I 22 Industrial Site26 Lamar County Industrial Park27 Childersburg Industrial Park28 Baldwin EMC Site29 Houston County Distribution Pk30 Shelby West Corporate Park31 Capital Park at Westport32 Breeding Industrial Park South33 Westervelt Calera Megasite34 Geneva County Industrial Park 35 Schuman Property Cullman 36 Foley Beach Express Ind Park37 Mallard Fox West Ind. Complex38 Morgan Center Business Park39 SouthPoint Business Pk Lot 1240 Elm Industrial Park

AdvantageSites

AdvantageSite SuccessesCompany Announced City County Capital Investment Jobs AdvantageSite

POSCO America Corporation Nov. 2009 McCalla Jefferson $ 17,000,000 60 Jefferson Metropolitan Park MCTVA Nuclear April 2010 Hollywood Jackson N.A. 50 Jackson County Industrial ParkHyundai Electric Systems Alabama Inc. July 2010 Montgomery Montgomery $ 90,000,000 1,000 Interstate Industrial ParkGE Aviation Nov. 2010 Auburn Lee $ 50,000,000 400 Auburn Technology Park WestPharmavite Sept. 2011 Opelika Lee $ 74,000,000 280 NE Opelika Industrial Park SiteARKAL Automotive Nov. 2011 Auburn Lee $ 7,200,000 25 Auburn Technology Park WestSiO2 Medical Products March 2012 Auburn Lee $ 90,000,000 300 Auburn Technology Park WestG&B Global May 2012 McCalla Jefferson $ 4,800,000 75 Jefferson Metropolitan Park MC

Brown-Forman Cooperage June 2012 Trinity Lawrence $ 55,000,000 200 Mallard Fox West Industrial Complex

RAPA (Rausch & Pausch LP) December 2012 Auburn Lee $ 18,000,000 105 Auburn Technology Park West

REHAU January 2013 Cullman Cullman $ 119,000,000 250 Schuman Property

TOTAL       $ 525,000,000 2,745  

Alabama’s AdvantageSite Program has been recognized by Southern Business & Development Magazine as one of the country’s top 10 site programs.

AdvantageSite – Raising the Bar

2008–2009 Designations2008-2012 Designations

2013 In the Pipeline

What are Alabama’s Targeted Markets?

Alabama’s Targeted Market Sectors

Alabama’s Targeted Market Sectors

US Auto Sales Trends

250,000

300,000 350,000

340,000

350,000

300,000

Expanding Production

Airbus Business Opportunities

What some key attributes a community must possess for successful economic development?

– Financing– Plan– Organizatio

n– Direction– Staff– Control– Product

Key Attributes:

Economic Development is a Journey . . .

not a destination!